Punitive damages reintroduced in NYC asbestos litigation

NEW YORK (Legal Newsline) - On Tuesday, New York Supreme Court Justice Sherry Klein Heitler delivered an order reinstating claims for punitive damages in the New York City Asbestos Litigation.

The Weitz & Luxenberg law firm filed the motion requesting an order to lift former deferral requirements for punitive damages in Section XVII of the NYCAL Case Management Order (CMO).

"What I cannot ignore is the fact that victims of asbestos exposure are permitted to apply for punitive damages in every New York state court except this one," Heitler wrote. "I for one cannot justify a situation in which an asbestos plaintiff is permitted to apply for punitive damages in Buffalo but not this court. This raises serious constitutional equal protection concerns which should not be overlooked."

Opponents of the motion for allowable punitive damages include the NYCAL defendants' counsel, various members of the NYCAL defendants' bar and several individual defendants, as well as the Coalition for Litigation Justice.

"The ruling will enrich plaintiffs' lawyers at the expense of those who develop asbestos-related illnesses in the future," the American Tort Reform Association stated in a recent Judicial Hellholes post.

Defense attorney Mark Behrens of Shook, Hardy & Bacon explained that Perry White of the plaintiff's side argued that claimants needed a club to beat defendants into settlement because there aren't enough trial dates available.

However, the thought struck Behrens as odd considering the plaintiffs typically argue that defendants are trying to take away jury trials; and now plaintiffs indicate they are trying to remove jury trials in an attempt to reach more settlements, he said.

"The order gives asbestos plaintiffs firms in New York a new club for pounding defendants into giving up their right to a jury trial," Behrens continued.

Heitler credited each side for presenting "well-reasoned, thoughtful" arguments, but granted Weitz & Luxenberg's motion for punitive damages on a case-by-case basis, stating that the amended CMO will continue to govern all NYCAL proceedings.

"I therefore hold that pursuant to CMO XVII, following notice and a hearing, the deferral of counts for punitive damages in NYCAL cases is lifted, and CMO XVII shall be deemed modified as hereinafter set forth," Heitler wrote. "As such plaintiffs are no longer barred from applying to the NYCAL trial judges for permission to seek punitive damages."

The modified section reads:

"Applications for permission to charge the jury on the issue of punitive damages shall be made on a case by case basis to the Judge presiding over the trial(s) of the action(s) at issue, who shall determine such application(s) in his or her discretion and in accordance with the particular trial schedule established by such Judge. Such applications shall be made at the conclusion of the evidentiary phase of the trial upon notice to the affected defendant(s), to which such defendant(s) shall have an opportunity to respond. Should the trial Judge, in his or her discretion, permit such charge, and the jury determines that punitive damages are warranted, the trial Judge shall hold a separate trial before the same jury solely on the issue of the amount of punitive damages to be awarded."

Heitler further determined that New York law requires NYCAL plaintiffs to have the same opportunities to seek punitive awards as any other plaintiff in the state, which must be applied equally.

In response, she acknowledges that punitive damages are typically accepted in New York courtrooms when the wrongdoing was deliberate "and has a character of outrage frequently associated with crime."

However, Heitler made it clear that she expects plaintiffs to use their new tool ethically.

"While plaintiffs have evinced their intention not to abuse this opportunity, it is appropriate for the court to caution the plaintiffs' bar not to overstep this permission by attempting to seek punitive damages indiscriminately," Heitler wrote. "Punitive damages should only be sought in the most serious cases to correct for the most egregious conduct, and must present a valid reference to corrective action."

ATRA, on the other hand, does not appear to be convinced the punitive damage awards can be used responsibly. According to the 2013 Judicial Hellholes Report, the average jury award for plaintiffs in all NYCAL cases since 2007 is $21.7 million, which is roughly seven times larger than the $3.1 million average award in courts throughout the rest of the state.

"The only purpose piling on punitive damages serves is to make NYC's asbestos lawsuit industry even more lucrative," the ATRA post states.

In her order, Heitler explained that modern lawsuits recognize the remedy of punitive damages as punishment for extraordinary wrongdoing and as a means to deter future harmful conduct. Therefore, punitive damages are aimed at retribution and deterrence.

According to New York's Pattern Jury Instructions, the "purpose of punitive damages is not to compensate the plaintiff but to punish the defendant ... and thereby discourage the defendant and other (people, companies) from acting in a similar way in the future."

As for NYCAL's CMO, the order states that tens of thousands of "complex, time-consuming" asbestos lawsuits have been filed in the New York Supreme Court alone.

In an effort to manage the court's asbestos docket, Justice Helen E. Freedman oversaw the origination of the CMO in 1988 to govern all NYCAL cases.

The CMO was originally silent on the issue of punitive damages, Heitler explained. However, in 1996 Freedman independently added section XVII, which "requires that all punitive damage claims be deferred until such time as the court deems otherwise, upon notice and hearing.

"Because New York allows imposition of punitive damages in tort cases, rather than merely dismissing the claims, I deferred all punitive claims indefinitely," Freedman explained in a 2012 Southwestern University Law Review article.

Freedman added that it seemed like the right thing to do because she found no "corrective purpose" to charge companies with punitive damages for wrongs committed 20 or 30 years ago, and "in many cases, the wrong was committed by a predecessor company, not even the company now charged." Likewise, companies should not be repeatedly punished for the same wrong.

She also argued that punitive damages only deplete resources that should be used to compensate injured parties.

However, now the plaintiffs claim the "NYCAL landscape" has changed so dramatically since 1996 that deferral of punitive damages no longer applies, Heitler explained.

In response, the defendants filed a cross-motion to vacate the entire CMO and to continue deferring counts for punitive damages indefinitely, which Heitler denied.

The opposing parties claim Freedman's reasons for deferring punitive damages are "even stronger today than they were almost 20 years ago."

They agree with Freedman, arguing that the large number of punitive verdicts would inflate settlement values, resulting in fewer resources available to future asbestos claimants.

Both Behrens and ATRA agreed with the importance of these implications.

The asbestos litigation industry has already seen almost 100 companies file for bankruptcy. If plaintiffs today get huge verdicts with the addition of punitive damage awards, more companies will go bankrupt and victims of tomorrow will suffer, Behrens explained.

"Ultimately, the people who are going to pay the price are future asbestos victims," Behrens said.

Responding to a defense argument that punitive damages would deplete resources and force more companies into bankruptcy, Heitler countered it by saying they have failed to show that such bankruptcies were caused by punitive damage awards in the past.

Instead, she explained, information indicates bankruptcies were the result of initial mass filings and projections of future filings.

The opposing parties continue to argue that such awards would serve no purpose since nearly all asbestos-containing products have been eliminated nationally already and the availability of punitive damages in NYCAL would enhance the advantage that plaintiffs already have in asbestos litigation.

Heitler points out that when it comes to asbestos, she supports the defendants' argument that nearly all asbestos-containing products have been eliminated nationwide; therefore, "punitive damage awards may not serve a strictly corrective or deterrent purpose."

Heitler agreed that punitive damages indisputably are limited by constitutional constraints, but didn't go so far as to say they are unconstitutional.

"Contrary to defendants' arguments such constraints are not designed to deter plaintiffs from seeking them; the caselaw highlights the fact that punitive damages may only be awarded under certain circumstances," Heitler wrote.

On the other hand, ATRA asserts that these constitutional constraints have not been effective enough in the past.

"These constraints, however, have not stopped over 100 businesses from declaring bankruptcy due to asbestos liability," ATRA stated in its post. "And, while the U.S. Supreme Court has gradually adopted helpful measures to control punitive damages 'run wild,' the high court has not yet squarely and effectively addressed the due process implications of repeatedly punishing a business for the same conduct. While more than half of the states have placed an upper limit on punitive damage awards, providing some measure of predictability, New York legislature, dominated by plaintiffs' lawyers, has not done so."

Addressing the defendants' cross-motion to withdraw from the CMO, Heitler wrote that "while the plaintiffs' bar is not completely satisfied with some of the CMO's provisions, the defendants' bar is similarly not content with others. That is the reality of any bargained for position, to which the parties have signed on."

"Notwithstanding the great desirability of having the parties mutually agree to a case management plan, I am also compelled to point out that I nevertheless have the authority to issue case management orders upon consultation with the parties, and am not required to obtain their consent to the CMO as a whole or for any of its parts for it to be a valid order of this court," she added.

Heitler addressed the opposing parties' reluctance due to their concern that the remainder of the CMO favors the plaintiffs with accelerated trial settings, consolidated trials and standard discovery, calling the argument "unfounded."

She added that the negotiated provisions of the CMO "are in harmony" with the CPLR and New York's Uniform Rules for Trial Courts.

Ultimately, Heitler explains that CMO is designed to benefit all parties by eliminating transaction costs, discouraging repetitive discovery, requiring plaintiffs to produce proofs of claim prior to trial, and preventing the docket from becoming bogged down among other benefits.

She also expressed hope that all parties could continue litigating despite opposition to the reintroduction of punitive damages.

"From the inception of this litigation, plaintiffs' and defendants' counsel have zealously but respectfully litigated opposite each other under the CMO and all of its various modifications, ultimately with the ability in most instances to resolve their differences. It is my sincere hope that this will continue. I wish to thank the entire liaison committee for their professionalism and hard work over these past few years."